1. Some Background 5 billion gallons of #2 heating oil used annually in northeast for res/comm/ind heating (EIA) Low carbon biomass fuels (pellets and chips) can realistically and sustainably offset at least 10% of this demand (= 4.2 million ODT). Can be sourced from a variety of biomass feedstocks: forest/ag/urban/ residual/CLEAN C&D European (and soon American) heating technology now exceeds 90% efficiency, super clean emissions: central heating, district heating, community-scale CHP Bulk delivery makes fuel affordable and economical

3. Heating FuelCarbon Intensity gCO 2 e/MJ Ultra Low Sulfur Diesel (#2 distillate equivalent) 104 Natural Gas73.1 Soy BioDiesel35 Pellets from Woody Biomass19.8 Source: NESCAUM (draft)

4. Challenges Technology comparatively expensive (scale) Few incentives, unlike other renewables Regulatory/other market barriers (e.g. ASME) Adoption very price sensitive to conventional fossil heating fuels Technical competency in fuel manufacturing, uniform regional distribution Bulk fuel delivery infrastructure represents huge capital hurdle (“build it and they will come”)

5. Opportunity YES to a low carbon fuel standard for heating fuels – policy must be fuel/technology neutral: incentives for one technology but not for other achieving same goals create damaging market distortions A standard (mandate) combined with incentives will help to build the market Very difficult to implement in same way envisioned for transportation fuels The simplest approach is a modest “system benefits charge” on high carbon heating fuels, proportional to carbon intensity (gCO2e/MJ), implemented uniformly across region (e.g. RGGI) Use proceeds to catalyze market transformation, reduce capital hurdle, assist heating oil industry in diversifying Eliminate/phaseout charge once benchmark goals of mandate have been met